construction

We have variously done the following;

1. Warned Builders of the difficulties clients may present when you seek payment.

2. Warned Builders of the problems inherent in the practice of the client holding “retention money” as a security for the builder fixing any problems arising later.

3. Warned of the difficulties flowing from undertaking building work without a written contract;

4. The problems for clients when builders “buy” a contract and re-negotiate it to their advantage later, after they have started work.

5. Warned again of the difficulties flowing from undertaking building work without a written contract;

Now we write about the steps you must take when you don’t get paid. Most building or engineering contracts will have an Arbitration clause in some form or other. If so, it will be mandatory that the dispute be taken to arbitration. Get the help of a solicitor or a “claims consultant” to draft the papers for the arbitration. Depending on the nature of the dispute it might take a long time to produce workable drafts but it is essential work.

When the identity of the arbitrator is agreed he/she can give directions as to how the parties should proceed. It is wise for claimants to have anticipated the production of workable drafts.

The conduct of an arbitration by the claimant or the respondent is like the conduct of litigation; it needs the services of a litigator.

If a respondent is still trading (not in liquidation) it is open to the claimant to take the claim to arbitration with some prospect of making a recovery.

Unless we are practicing politicians (I mean of the Fianna Fail ilk) we should aspire to speak clearly and mean what we say.

“Inflation” is a term applicable to balloons and economies; we should remember that, when as here, the issue is economic inflation.

One of our clients holds the view that economic inflation is the mechanism by which certain social costs are transferred to the shoulders of old age pensioners. (Central government would, presumably, profess to avert such an outcome, because if it did not it would, we think, be removed from office, other things being equal). Our client might have expanded the opinion to include all persons on fixed and relatively low incomes.

The client’s view carries an implicit assertion; such a mechanism can be an engineered outcome. In short, the Government may desire exactly what it professes to decry. Or not.

We cannot afford to expend much effort to find out motivations; we should act on perceived outcomes.

Consider the “new” Public Works Contracts HERE. They were introduced in 2007 and are obligatory for use in State building projects.

They promptly came under criticism when introduced. (Who formulated them? We, here, think we know, but that is irrelevant; they were introduced on instruction. The Government gave the instruction).

See HERE for an extended treatise on what is wrong and unfair with the contracts.

There is nothing inherently evil about the Irish construction industry that the Government should seek to impose unfair costs in it. Those costs will fall inevitably on workers and their families.

It is beyond time to urgently revoke the provisions that saddle the industry with these contracts.

Education is not the focus of this blog. Prior reference to the Department of Education is made as an aside.

Construction and the construction industry is, however, a focus. It is instructive to get a judgment on anything, instead of the usual bureaucratic fog of words. So check out this article from “Construction Manager”

“Ireland: Setting benchmark costs
From a UK perspective, school building costs in Ireland are almost shockingly low. In February 2006, the Department of Education set a maximum build cost for primary and secondary schools of €1,230/m2 (£1,095), including VAT at 13.5%, but excluding site preparation and groundworks, professional fees and contractors prelims.
In November 2009, the DoE dropped the building cost limit to just €990m2 (£880). In fact, recent tenders have been coming in below that: according to Galway-based contractor JSL, the going rate for the building element is €600-€750/m2.
But the specifications expected in the two countries really aren’t comparable. Classroom sizes are smaller in Irish schools, there is no catering provision or dining halls, while floor, wall, ceiling and door finishes are all basic. Steve McGee FCIOB, JSL’s director of construction, says that it’s like visiting a “two-star hotel” compared to four stars in the UK.
Secondary schools are all individually designed, but primaries are based on the DoE’s “generic repeat design”: four variations each on 8, 12 and 16-classroom schools.
The DoE has also built “rapid delivery” primary and secondary schools using prefabricated timber SIPs or concrete panels in just 20 weeks. And it recently tendered two Passivhaus primaries, although McGee says the DoE was disappointed with the cost: JSL’s unsuccessful bid was €1,600/m2.
Ireland’s strict cost limits no doubt galvanised the market and put pressure on suppliers and product manufacturers. Unified procurement also meant no variation in procedures around the country, so learning from one project could be taken to the next. But the market struggled with the Passivhaus project.”

Readers of this blog may recall a Freedom of Information request to the Taoiseach and the Minister for Finance for details of the discussion between the Government and the EU Commission relating to the price at which Irish bank assets would transfer into NAMA. That information was never furnished.
It is no surprise, therefore that NAMA has claimed exemption from complying with any Freedom of Information requests.
There is a possibility for some information leakage, however. J K Galbraith records, of German hyperinflation of the early 1920s, in Money: Whence it Came, Where it Went, (A. Deutsch, London, 1975, p. 157):-

“’Zero stroke’ or ‘cipher stroke’ is the name created by German physicians for a prevelent nervous malady brought about by the present fantastic currency figures. Scores of cases of the ‘stroke’ are reported among men and women of all classes, who have been prostrated by their efforts to figure in thousands of millions. Many of these persons apparently are normal except for a desire to write endless rows of ciphers.”

“Ciphers”, here, are zeros.
Now, if we camp outside NAMA HQ, we can check for sick people staggering from the office and possibly relate the number of the sick to the destruction of the Irish economy.

Michael O’Leary, presumably, finally sought or was given proper legal advice. We can presume this from his craven back-pedaling we saw in the last few days.
He firstly refused to comply with Ryanair’s obligations, to compensate his customers for cancelled flights, under Council Regulation 261/2004, stating his obligations in terms of contract obligations only.
The next day he, cack-handedly said Ryanair would meet its obligations. He was cack-handed because the manner in which he made the concession was misleading; it suggested he had not changed his position and that customers were not entitled to any of the benefits he should have given to them.
If it were not for the fact that he referred to the Regulation obligations as “absurd” one would think he did not know of the Regulation, but he clearly did. What, then, changed his mind? What did he not know?
Despite the shameful failure of the Irish Government to introduce the possibility of conducting “class actions” in Ireland, O’Leary may have finally realized that he was going to be plunged into class actions in the UK.
Without exception, Ryanair travelers are “consumers” under EU law. Consequently, they are entitled to litigate disputes with Ryanair in the consumer’s place of residence.
Many of Ryanair’s customers were UK residents; they were going to issue proceedings in the UK. There, they could, and surely would, band together and litigate their claims as a class action. By this means they would off-set the advantage of size that Ryanair has over any single consumer, a circumstance perpetuated in Ireland by the sullen laziness of successive Irish Governments. (All that is required is to amend the Rules of the Superior Courts; something the Minister for Justice etc. could do in a flash).
As a measure of the power and benefit consumers would get from a class action, O’Leary folded just at the possibility of being at the receiving end of one, not waiting to find out what the experience would be like, an experience Brian Cowen will deny to Irish consumers even as he is driven from office.

Remarkably, the builder of the Courts of Justice in the Strand, in London, became insolvent during and as a consequence of the work.
Many Irish builders are now becoming insolvent. That’s inevitable in circumstances where their employers, developers, are now insolvent and heading into NAMA.
Whatever the reason, this kind of difficulty is endemic for builders. In Marlborough v Strong [1721] 1 Bro. (P.C.) 175 the builder of Blenheim Palace was shortchanged by the Duke of Marlborough to the tune of £7,300 (an enormous sum).
The Duke refused to pay the shortfall on the grounds that his alleged agent, the Earl of Godolphin was not his agent. In fact the Duke had engaged the services of the Earl precisely to act for him in relation to the building; to employ people (including the architect, Sir John Vanbrough); and to enter contracts for the purpose. The Duke claimed that the Earl was acting as Lord High Treasurer of England and not as his private personal agent. The court thought otherwise and gave judgment for the builders.
(The Duke resembled some of Ireland’s developers; the Duchess reported him as not bothering, on one occasion, to remove his high riding boots in going to the task of “pleasuring” her.)

Our offices are, almost, in Lower Bridge Street and I travel down Clanbrassil Street daily to get to them. It is an ironic occasion every morning for me to join the single lane of traffic traveling north on Patrick Street in front of St. Patrick’s cathedral. Until recently there were two lanes for the north-bound traffic; now, one is a dedicated bus lane.

In 1953, Dublin Corporation determined to ensure that traffic would not be hindered by narrow streets like Clanbrassil Street and Patrick Street. They should be widened, it felt. The Corporation persisted in this feeling from 1953 to 1989 when it finally built a “dual-carriageway” along [some of] Clanbrassil St. and on into Patrick Street.

The fact that the planned Compulsory Purchase Order, to implement this, undermined the values of the properties along the west side of Clanbrassil Street and Patrick Street, from 1953 onwards, is neither here nor there.

What is of moment is this: we no longer care about traffic, that is, the private motor car. We have changed our viewpoint. We cheerfully squeeze it daily into a narrow traffic lane in Patrick Street. That’s not the only change. Dublin Corporation is now Dublin City Council: it hasn’t gone away and it is still an institution of vision.

Currently, it has a vision for a waste incinerator in Ringsend. Perhaps we need such a thing. But will we always? Will we always think it a good thing to burn rubbish? To burn it within the city?

The answer is yes, because the operator of the proposed incinerator will compel us to do it, under the terms of a contract signed by it and Dublin City Council.

Peculiarly, the property rights in rubbish may be more easily defended than the property rights in buildings.

It is a surprising fact that most contracts are concluded without reference to lawyers. It is surprising because of the extent of the law of contract and the effect of getting something wrong in the conclusion of the contract.

Contract law is an essential element of the world of commerce. Buying and selling things is what contract law is about. So, too, is the provision of services.

Most contracts are for small items and small sums; our transactions as we buy our groceries are typical. We do not expect to have to enter written contracts for these items, and we don’t. Nevertheless, these sales are subject to ascertainable conditions and terms, nowadays often emanating from the European Parliament.

If the Government decides to build substantial roadways across the landscape it will, of necessity, enter a contract, or contracts, to achieve that objective; the alternative would be to establish a national workforce in the employment of the State to directly build the roadways. We don’t do that.

Signing a contract for a new roadway (or a new building) is a significant matter. The contract will have to provide for a great number of things, not least the specification for the type or quality of road or building.

A lawyer should not be far removed from this occasion. After all, who drafted the contract? It should have been a lawyer. What if the written terms contain an ambiguity? There is a standard method, or rule, for dealing with that; the contract is interpreted against the person who drafted it.

There is another practical approach; use a standard form of contract. The benefits of such a form are enormous. Any ambiguities will have been eliminated, and the experience of predecessors will have been built into the contract with clauses providing for all the issues and matters that need to be addressed or provided for.

However, these large contracts will often have special conditions to be inserted into them; the facts will require it. It is a general rule that special conditions override general conditions where there is a conflict between them. In that case there is an unavoidable need for a lawyer.

In the construction industry many contracts commence as a consequence of the conclusion of the main contract. The contractor will, of necessity, have to source the skills required to do some of the work, possibly most of it, from specialist sub-contractors. Because of the time consumed in finding the sub-contractors, there may be exchanges of letters of intent or such like. Astonishingly, the result may be that there is no contract between the contractor and the sub-contractor. If the sub-contractor does work in such circumstances, it will still be entitled to be paid. The claim will be in quasi-contract on a “quantum meruit” basis. The work will be valued at market rates and a profit element will then be added. That is what the sub-contractor will be entitled to.

For the contractor, this may be a severe blow. Claims of delay, if any, (there will be such) and consequential, loss will not be enforceable by the contractor.

In construction contracts the payment of liquidated damages is a benefit to the parties. Depending on the circumstances it can benefit the developer by relieving it of the obligation to prove a loss, whereas it can generally benefit the contractor in relieving it from the necessity to resist a [valid] claim and also introduces certainty as to consequences of the contractor’s default. Both parties can avoid expensive disputes in the courts with consequent delay for the project.

However, it is not a carte blanche for the contractor to neglect its obligations in terms of time, say.

In Bath and North East Somerset District Council -v- Mowlem Plc [2004] CA, Mowlem refused to follow an architect’s instruction. The developer council advised Mowlem that if it persisted in its refusal the council would engage another contractor to do the work. Mowlem again refused to do the work and the council instructed another contractor on the matter whereupon Mowlem refused to allow the replacement contractor on the site to do the work.

The council applied for an injunction to effect entry for the replacement contractor. Mowlem, in resisting the application, claimed that the only loss accruing to the council was a loss of time and that was capable of being remedied under the terms of the contract, which fixed liquidated damages for the delay.

The court disagreed and stated:

Mowlem is not entitled to breach its contract. The agreement on liquidated and ascertained damages is not an agreed price to permit Mowlem to do so, and it does not preclude the court granting any other relief that may be appropriate. In my view, the Council’s case is right in principle.”

There was evidence to show that the council’s loss would exceed the liquidated damages and the court affirmed the injunction granted in first instance to the council.

It seems my post on bidding for public contracts in the construction industry missed one element – bid-rigging. See HERE.